Naked Ambition

I have a feature article in the first issue of The Globe And Mail's new magazine, Report On [Small] Business. Titled "Naked Ambition," it's a business profile of a Montreal couple who turned their swinging lifestyle into a major adult business. I'll put a PDF of the magazine version up soon, but you can check it out online here right now. Here's an excerpt the full piece:

Naked Ambition
Craig Silverman
Report On [Small] Business Magazine

The PA system pops to life. "Make some noise!" the announcer screams.

Two hundred well-lubricated fans jump to their feet as heavy rock music
pounds down from the speakers. A wrestling ring sits at the centre of
the large back room at Bogey's World, a cavernous pool hall littered
with big-screen TVs, in Montreal's Rosemont neighbourhood. The crowd is
here for an evening of flying headbutts and piledrivers hosted by the
International Wrestling Syndicate (IWS), a small but growing wrestling
company based in Montreal. The people who fill the front row of folding
wooden chairs race toward the ring and pound their fists on the canvas.

Back near the bar, all eyes are on Carol McAlear. She is petite not
quite five feet tall with blond hair and an easy, wide smile. Her sheer
black top offers a hint of her surgically enhanced chest. As three
tag-teams enter the ring for a six-man brawl, Carol glad-hands with
some of her fans. At one point she pulls down her top to flash the
group. A woman gamely grabs one of her breasts. They share a glance and
smile. Carol's husband and business partner their company, Wild Rose
Productions, owns half of the wrestling syndicate stands just a few
feet away, but he doesn't bat an eyelash. It's business, after all.

For the past nine years, Danny McAlear has been charging porn
enthusiasts up to $19.95 (all currency in U.S. dollars) a month to see
much more of his wife's anatomy, watching her disrobe and have sex with
hundreds of men and women on her porn site. Ever since he first posted
naked pictures of Carol (the mother of his three children) on a website
he created back in 1994, she's been known as Carol Cox, amateur porn
star, swinger and horny housewife.

Long-time swingers, the McAlears were looking for new couples to
socialize and have sex with. Along the way, they created a porn empire.
Today, carolcox.com is part of a network of sites that generate more
than $1 million a year.

Remarkably, in an industry where anyone can slap up a pay-for-porn
site, where customers rarely stay with one site for more than a month,
and where there's always someone younger and bustier popping up, the
McAlears have managed to take on all comers, adapt and succeed.

During an interview at the IWS show, Carol's outgoing, exhibitionist
side—the one you see on-line—disappears, replaced by a shy, giggling
suburban mom. She stares at the tape recorder and fidgets as she
struggles with each response.Danny, she says, usually does the talking. And what about her? She
motions toward her face with her fist to show she's more comfortable
using her mouth for purposes other than talking to reporters. But even
in semi-retirement, there's more to porn than being in bed. "We're not
just having sex all the time," she smiles. "It's adult, but it's also a
business."

The McAlears' business savvy has managed to keep Carol's eponymous
"amateur" site pumping out content for 9,000 happy customers, even as
the star herself has stepped back from performing full-time. With more
than a decade in the business and some 500 porn scenes under her belt,
Carol doesn't need the work any more, though she still does admin for
Wild Rose. Her husband, however, isn't ready to retire to the sailboat
he's always had his eye on. Along with his investment in the IWS (which
he says is in the five figures), McAlear recently launched a venture
he's betting will establish Wild Rose Productions as a juggernaut in
the burgeoning "adult lifestyles" niche—essentially it's a smorgasbord
for swingers—just as his wife's site did in the amateur porn category.

Wild Rose's story isn't about sex so much as it's about building
customer relationships, establishing a niche and outmarketing the
competition in a cutthroat business. It's also about taking a flyer on
new technologies to make a buck.

As it turns out, you can learn a lot from a pornographer.

When Danny McAlear steps out of his late-model purple Sebring
convertible, he looks the part of a porn mogul: a middle-aged guy with
a beer gut and a gaudy shirt, chest hair poking out the top. It's a
warm, cloudy fall afternoon in Pointe Claire, an affluent borough on
Montreal's West Island and home to Wild Rose's office. In his deep,
gruff voice, McAlear suggests we forgo the office tour—"It just looks
like a normal office"—and instead drives a couple of blocks to Cheers,
a neighbourhood bar.

In the early days of internet porn, McAlear would book the bar and
put out the call: Come party with Carol and me. It was a chance to meet
the horny housewife in person. "On the first Saturday night in 1996, we
had six people come out," says McAlear. Within a couple of months, they
were packing the place. Soon they had to move to a bigger bar, where
the McAlears' swinging friends (Montreal's swinging community is
reportedly thousands strong) would mingle with gawkers who spent their
free time on the internet, watching Carol have sex.

Wild Rose's strong early start is the reason McAlear says his site
now brings in $100,000-plus a month, compared with the $4,000 to $5,000
most amateur sites pull in. ("Amateur'' is the term the McAlears use to
describe women who aren't professional porn stars, but enjoy having sex
on camera and presumably love the cash they can pull in every month.)

As he hoovers his way through a pack of cigarettes, McAlear explains
how he went from working stiff to porn king. He was a mechanical
engineer at Bell Helicopter when he introduced his wife to porn fans
worldwide. Carol Cox was a hit, so the McAlears shot more photos and
started selling videos via mail order. In 1997, when the internet could
finally handle credit-card processing, they introduced a monthly
membership fee of $9.95 and began streaming videos—cutting-edge
technology that was largely being driven by the porn industry.

All the while, McAlear was still holding down a day job. "We turned
the pay site on in January, 1997," he says. "By February we were doing
over $30,000 in sales. In mid-March I quit Bell. I was losing money
going to work."

Carol "performed" four days a week to keep the content fresh and
members happy. McAlear staffed up and added more sites. Some were built
around a specific girl, like Carol's site. Others had a theme, like the
one called pornaudition.com, where aspiring starlets were put to the
test on camera by one of Wild Rose's resident stunt jocks.
Girls who fared well in the audition could then get work on
Wild Rose's other sites. To create the sites and drive new revenue, the
company hired more talent and built a system of webcam shows and chat
rooms to bring members closer to their favourite performers. This also
drove additional revenue. They weren't just sex-crazed, they were
tech-savvy. A year after turning on the pay site, visitors could ante
up $3.99 per minute to have a private chat with a girl via webcam and
instruct her to do whatever they wanted. At that time,
instant-messaging programs like ICQ were spreading to the mainstream.
Wild Rose's combination of instant video and chat was a highly advanced
offering, not to mention a lucrative new revenue stream.

The company also threw special pay-per-view events—like the time 50
guys and 11 girls had sex on camera, while customers watched the orgy
unfold live on their home PCs.

Leveraging technology to deliver better customer service and more
interaction was key to McAlear's success, and the success of the porn
industry as a whole (see "Tech's Untold Story," page 21). "We
introduced these things because the ability to interact with the girls
is critical in a niche like ours," says McAlear. "Now you can go in and
talk to a girl and she'll do things for you."

Customers could also give Wild Rose instant feedback on what they
liked and didn't like. If someone sent McAlear an e-mail requesting,
say, a space-sex fantasy replete with busty aliens and lonely
astronauts, Wild Rose could have it onscreen in a few weeks. In a
regular feature called Casting Couch, avid fans in the Montreal area
could even step inside the studio to shoot a scene with Carol Cox.

But the porn scene was changing. Sure, Wild Rose had its loyal band
of members, yet thousands of other sites were now competing for their
eyeballs. And just like every other business, McAlear was finding it
hard to keep up with producers overseas, who could pump out porn at
half the cost.

At the top of the on-line porn boom, in 1999, Wild Rose was
raking in more than $3 million a year. Its office and production
studios occupied a 10,000-square-foot warehouse in Pointe Claire. A
staff of 24 designers, video editors and marketers created websites,
videos and photos for the company's growing customer base:20,000
members, mostly from North America, were now paying $16.95 a month to
watch Carol and others have sex. McAlear even had a full-time carpenter
on staff to build elaborate sets. Carolcox.com was fast becoming one of
the most popular and lucrative adult websites in North America.
Membership fees alone accounted for 80% of Wild Rose's revenue, with
the rest coming from video sales, banner ads, chats and pay-per-view
events.

But Carol Cox was no longer the only housewife on the internet. In
1998, the U.S. Justice Department estimated there were roughly 28,000
porn sites. By 2001, it had found more than 280,000. It was hard to
hang on to existing members, and new ones were tough to sign up. People
would join a site for a month, then cancel their membership before
their credit card got dinged. Everyone was on the hunt for some new
fetish or niche. For McAlear, coming up with fresh concepts and keeping
members happy was a constant challenge. "It would drive me crazy
because we would develop something," he says, "and in a few months
everyone would be doing it."

By then, Carol was a 37-year-old mother of three two boys and
a girl, then ranging in age from 1 to 15, who wanted to ease her way
out of performing. That meant McAlear had to find a way to keep the
Carol Cox brand alive without its star act. He was also stuck with more
than 20 employees focused on producing original content, when the
forces of globalization meant he could buy "completed scenes"—15-minute
videos, plus a few hundred photographs taken during the shoot—from
countries like Russia and the Czech Republic for $1,000 or less,
instead of the $2,500 he was paying to produce them in-house.

But there was a problem: Buying content from overseas didn't allow
for the one-to-one marketing Wild Rose was known for. Russian models
couldn't fly to Montreal to attend a members-only party, nor were they
readily available for chats or to respond to member e-mails.

In 2002, McAlear took a drastic step: He downsized his digs, cut
down on original content and laid off all but five of his staff. The
video editors, web designers and set designers were gone. All of Wild
Rose's energy would now be focused on the amateur side of the business,
anchored by the original carolcox.com site. From there, McAlear would
give members access to more than 60 amateur sites that would make up
the Wild Rose Network.

At the time, a newcomer who wanted to set up a site would have to
compete with networks that offered hundreds of girls and a huge archive
of videos and photographs. The only way for individual performers to
compete was to band together and offer customers a wide selection of
sites, with frequently updated content, for a single fee.

McAlear had industry experience, constant traffic, a well-known
brand and a library of content that offered a strong foundation for his
new network. He recruited amateur performers from across North America
and built templates that slashed the amount of time it would take to
launch a new site. He also automated the process used to upload content
by designing a web-based back-end site, where the performers could log
in and post their new pictures and videos. Members got access to a huge
range of amateur sites, and McAlear got a steady stream of new content
without having to produce it himself. "We wanted real women, not paid
models," he says. "They have ownership, so they care about what they're
doing, and they'll talk to members on a webcam or in a chat."

Mina, a 34-year-old New Brunswick woman who joined the network
in September, came to Wild Rose after "reaching a plateau" with another
company. She says McAlear is better at retaining members than was her
previous network, and he offers more services to performers like her.
"There's no question about their integrity because they've been around
for so long," she says.

Mina says she fits into the "horny housewife" category, though she
also offers a bit of a goth image and "light fetishes"—things like
donning pantyhose or wearing glasses. She shoots her hard-core scenes
with her husband, Chaz, and also performs solo. She's been on-line
since 2001. Her goal is to bring in a minimum of $2,000 a month from
memberships and video sales, and she's getting close. To draw in new
customers, she's come up with a bonus offer: New members who sign up
for an annual subscription get their choice of an autographed 5x7
photograph or "one of my worn panties or thongs."

It's not all about the cash, though. Mina insists she and Chaz just
wanted to share their "incredible" sex life with others. "You have to
run in the red for several years, and it's conceivable to put in 70
hours a week for almost pennies during that time," she says. "Right now
I'm having a good time, and I'm boffing my husband for pay."

Nine thousand porn enthusiasts across North America now pay
to access carolcox.com and the Wild Rose Network. That's down
significantly from the high-water mark of 20,000, but it's still
impressive by today's standards, where many adult sites consider it a
major coup to hit 1,000 members. "The Network took the focus off us
making our own content," McAlear says. "It also helped that Carol was
going into semi-retirement, and her site was still too big and too
popular to shut down."

Today, one of Wild Rose's five employees manages the Network; the
rest manage Carol's site and the other Wild Rose products. McAlear has
also off-loaded responsibility for managing his interest in the
International Wrestling Syndicate so he can focus on his next project:
In June, 2005, Wild Rose flipped the switch on an on-line adult
community called the Adult Lifestyles Network. The backbone of the site
is the Adult Personals Network, where singles or couples chat with each
other via webcam or instant message, post videos of themselves on their
personal page, and organize and attend sex parties. One party, held
this past November at a private home in Montreal, drew about 30 people
many of whom ended up in bed together.

By late January, ALN had 12,000 members, though only about 500 were
paying the $24.95 monthly fee (to drive traffic, sign-up was free from
June to November). "This is something we're going to take slowly," says
McAlear. "We're not out just to be another personals site. We're trying
to develop a true adult community."

Wild Rose is venturing into a highly competitive market. Massive
adult-oriented networks like AdultFriendFinder, based in Palo Alto,
Calif., have been running for years. In fact, AFF is one of the 50 most
visited adult sites on the internet, with more than 22.3 million
members, many of whom pay $10 and up a month for extra content.

McAlear has one advantage, at least on his home turf: He and Carol
are minor celebrities. Their plan is to act as the official faces of
the ALN, showing up at parties to mix with members. So here they are at
Bogey's, home of the IWS. McAlear's getting twice the mileage out of
this appearance promoting the fledgling wrestling outfit and spreading
the word about his new adult network. As wrestlers with handles like
Marc Le Grizzly, Kid Kamikaze and Beef Wellington thrash it out in the
ring, Montreal's swinging supercouple are surrounded by close to 20 ALN
members, and they all want a piece of Carol Cox. She flirts and flashes
just enough to ensure they go looking for more on-line.

McAlear is hoping ALN will appeal to a much wider audience. "We're
looking at ways of going into more mainstream marketing with ALN
because it's not porn it's adult," he says, noting there's a difference
between producing sex content and creating a website where sexually
active adults can meet and interact with each other—which is why he and
Carol first started posting naked photos on-line in the first place.
"There are a lot of grey areas, and I don't know what will happen,"
says Montreal's porn king. "We're going to make money; it's just a
question of how much and how well."

TECH'S UNTOLD STORY

Video may have killed the radio star, but it created the porn star.

When the VHS video was released in 1976, the adult industry was the
first to recognize its potential and drive acceptance of the format.
Think Boogie Nights—Burt Reynolds's porn-producing character loses his empire when he bucks the industry trend and sticks with celluloid.

VHS wasn't the only technology to be quickly co-opted and championed
by the porn industry. "As it stands now, new technology is probably
sexualized in the first 10 minutes of its development," said Michael
Storch, a professor in McGill's faculty of religious studies, in an
October, 2005, interview. The first pay-TV channels relied heavily on
porn for profits, as did (and do) hotel pay-TV offerings. The adult
industry was also among the first to monetize the internet through mail
order, and then via monthly memberships paid by credit card. The trend
continues. Some $400 million was spent worldwide on mobile-phone porn
in 2004, according to Strategy Analytics, a research firm in Boston,
and it predicts the mobile porn market will be worth $5 billion by 2010.

Many of today's most commonly used and valuable internet
applications were either invented or perfected by the adult industry.
It was instrumental in driving the introduction of on-line credit-card
processing, improving video streaming and perfecting the compression of
images for on-line viewing. Porn-site operators introduced webcams and
private chats long before they made their way to the average desktop.
When DVDs and digital video cameras hit the market, pornographers were
the first to jump on board. "If it wasn't for the adult market," says
McAlear, "live and streaming video wouldn't have developed as fast as
it did."

April 25, 2006 | Filed Under Feature articles, Magazine articles, Report on Business Magazine, The Globe And Mail 

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